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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 2, 2002
COMMISSION FILE NUMBER 0-19714

E COM VENTURES, INC.

STATE OF FLORIDA I.R.S. NO. 65-0977964

11701 N.W. 101ST ROAD
MIAMI, FLORIDA 33178

TELEPHONE NUMBER: (305) 889-1600

INDICATE BY CHECK MARK WHETHER THE REGISTRANT, (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING TWELVE (12) MONTHS (OR FOR SUCH SHORTER PERIOD THAT
THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST NINETY (90) DAYS.

Yes   x   No   o

COMMON STOCK $.01 PAR VALUE
OUTSTANDING SHARES AT
DECEMBER 9, 2002, 2,506,834





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TABLE OF CONTENTS



|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                       
|                                                     | ITEM 1. FINANCIAL STATEMENTS                                                                 
|CONSOLIDATED CONDENSED BALANCE SHEETS               
|CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS     
|CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS     
|NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|                                                     | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                     | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                          
|                                                     | ITEM 4. CONTROLS AND PROCEDURE                                                               
|PART II. OTHER INFORMATION                          
|                                                     | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                                     | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                                                     | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                                                     | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                     | ITEM 5. OTHER INFORMATION                                                                    
|                                                     | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                          
|CERTIFICATION OF CEO                                
|CERTIFICATION OF CFO                                



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TABLE OF CONTENTS

E COM VENTURES, INC. AND SUBSIDIARIES

|           |  |                                                                                                                                                                                            |  |        
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------
|           |  | PART I
FINANCIAL INFORMATION                                                                                                                                                               |  |        
|          
|ITEM 1.    |  | FINANCIAL STATEMENTS (unaudited)                                                                                                                                                           |  | 3      
|          
|           |  | Consolidated Condensed Balance Sheets
Consolidated Condensed Statements of Operations
Consolidated Condensed Statements of Cash Flows
Notes to Consolidated Condensed Financial Statements |  | 3
4
5
6
|          
|ITEM 2.    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                                                                                      |  | 11     
|          
|ITEM 3.    |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS                                                                                                                                |  | 17     
|          
|ITEM 4.    |  | CONTROLS AND PROCEDURES                                                                                                                                                                    |  | 17     
|          
|          
|           |  | PART II
OTHER INFORMATION                                                                                                                                                                  |  |        
|          
|ITEM 1.    |  | LEGAL PROCEEDINGS                                                                                                                                                                          |  | 17     
|          
|ITEM 2.    |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                                                                                                                                  |  | 17     
|          
|ITEM 3.    |  | DEFAULTS UPON SENIOR SECURITIES                                                                                                                                                            |  | 17     
|          
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                                                                        |  | 17     
|          
|ITEM 5.    |  | OTHER INFORMATION                                                                                                                                                                          |  | 17     
|          
|ITEM 6.    |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                                                                                           |  | 17     
|          
|SIGNATURES |  | 18                                                                                                                                                                                        

2



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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

E COM VENTURES, INC. AND SUBSIDIARIES




CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


|                                                                                                                                             |                                            |   |                  |             |                  |   |             |             | 
|-------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ---------------- | ----------- | ---------------- | - | ----------- | ----------- | 
|                                                                                                                                             |                                            |   | NOVEMBER 2, 2002 |             | FEBRUARY 2, 2002
|                                                                                                                                             |                                            |   |                  |             |                 
|ASSETS:                                                                                                                                      |                                            |   |                  |             |                  |   |             |            
|Current assets:                                                                                                                              |                                            |   |                  |             |                  |   |             |            
|Cash and cash equivalents                                                                                                                    |                                            | $ | 1,997,818        |             |                  | $ | 1,600,787   |            
|Trade receivables, net                                                                                                                       |                                            |   | 784,664          |             |                  |   | 635,240     |            
|Advances to suppliers                                                                                                                        |                                            |   | 5,705,709        |             |                  |   | 3,426,525   |            
|Inventories, net                                                                                                                             |                                            |   | 80,936,203       |             |                  |   | 68,387,570  |            
|Prepaid expenses and other current assets                                                                                                    |                                            |   | 1,200,138        |             |                  |   | 1,336,287   |            
|Receivable from affiliate                                                                                                                    |                                            |   |                 |             |                  |   | 811,169     |            
|Investments available for sale                                                                                                               |                                            |   | 351,011          |             |                  |   | 1,313,740   |            
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|                                                                                                                                             | Total current assets                       |   |                  | 90,975,543  |                  |   |             | 77,511,318  | 
|Property and equipment, net                                                                                                                  |                                            |   | 18,404,738       |             |                  |   | 21,348,967  |            
|Goodwill and other intangible assets                                                                                                         |                                            |   | 2,566,660        |             |                  |   | 2,740,315   |            
|Other assets, net                                                                                                                            |                                            |   | 807,556          |             |                  |   | 958,026     |            
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|                                                                                                                                             | Total assets                               |   | $                | 112,754,497 |                  |   | $           | 102,558,626 | 
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                                        |                                            |   |                  |             |                  |   |             |            
|Current liabilities:                                                                                                                         |                                            |   |                  |             |                  |   |             |            
|Bank line of credit                                                                                                                          |                                            | $ | 36,732,942       |             |                  | $ | 30,734,662  |            
|Current portion of long-term debt                                                                                                            |                                            |   | 142,702          |             |                  |   | 454,219     |            
|Accounts payable, non-affiliates                                                                                                             |                                            |   | 29,599,555       |             |                  |   | 17,924,889  |            
|Accounts payable, affiliates                                                                                                                 |                                            |   | 19,221,059       |             |                  |   | 16,767,667  |            
|Accrued expenses and other liabilities                                                                                                       |                                            |   | 5,439,762        |             |                  |   | 5,956,743   |            
|Subordinated note payable, affiliate                                                                                                         |                                            |   | 2,950,000        |             |                  |   | 100,000     |            
|Current portion of obligations under capital leases                                                                                          |                                            |   | 1,537,489        |             |                  |   | 1,664,827   |            
|Current portion of convertible notes payable                                                                                                 |                                            |   | 2,423,549        |             |                  |   | 1,148,429   |            
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|                                                                                                                                             | Total current liabilites                   |   |                  | 98,047,058  |                  |   |             | 74,751,436  | 
|Long-term debt, less current portion                                                                                                         |                                            |   |                 |             |                  |   | 31,860      |            
|Long-term portion of obligations under capital leases                                                                                        |                                            |   | 343,503          |             |                  |   | 1,076,106   |            
|Long-term portion of convertible notes payable                                                                                               |                                            |   |                 |             |                  |   | 4,095,811   |            
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|                                                                                                                                             | Total liabilities                          |   |                  | 98,390,561  |                  |   |             | 79,955,213  | 
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|Commitments and contingencies                                                                                                                |                                            |   |                 |             |                  |   |            |            
|Shareholders equity:                                                                                                                        |                                            |   |                  |             |                  |   |             |            
|Preferred stock, $.10 par value, 1,000,000
shares authorized, none issued                                                                    |                                            |   |                 |             |                  |   |            |            
|Common stock, $.01 par value, 6,250,000 shares
authorized; 3,156,786 and 2,980,305 shares issued
in fiscal years 2002 and 2001, respectively |                                            |   | 31,568           |             |                  |   | 29,803      |            
|Additional paid-in capital                                                                                                                   |                                            |   | 71,519,635       |             |                  |   | 71,455,401  |            
|Treasury stock, at cost, 779,952 and 766,802 shares
in fiscal years 2002 and 2001, respectively                                              |                                            |   | (7,085,940       | )           |                  |   | (7,038,638  | )          
|Accumulated deficit                                                                                                                          |                                            |   | (46,788,622      | )           |                  |   | (39,202,863 | )          
|Notes and interest receivable from shareholder and officer                                                                                   |                                            |   | (3,312,705       | )           |                  |   | (2,881,624  | )          
|Accumulated other comprehensive income                                                                                                       |                                            |   |                 |             |                  |   | 241,334     |            
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|                                                                                                                                             | Total shareholders equity                 |   |                  | 14,363,936  |                  |   |             | 22,603,413  | 
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            
|                                                                                                                                             | Total liabilities and shareholders equity |   | $                | 112,754,497 |                  |   | $           | 102,558,626 | 
|                                                                                                                                             |                                            |   |                  |             |                  |   |             |            

See accompanying notes to consolidated condensed financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES




CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |            |  
|----------------------------------------------------- | ------------------------ | - | ---------------- | ---------- | ---------------- | - | ----------------- | ---------- | ----------------- | - | ----------- | ---------- | - | - | ----------- | ---------- | -
|                                                      |                          |   | Thirteen Weeks   |            | Thirteen Weeks   |   | Thirty-Nine Weeks |            | Thirty-Nine Weeks
|                                                      |                          |   | Ended            |            | Ended            |   | Ended             |            | Ended            
|                                                      |                          |   | November 2, 2002 |            | November 3, 2001 |   | November 2, 2002  |            | November 3, 2001 
|                                                      |                          |   |                  |            |                  |   |                   |            |                  
|Net sales                                             |                          | $ | 43,112,160       |            |                  | $ | 41,864,998        |            |                   | $ | 131,370,000 |            |   | $ | 126,649,439 |           
|Cost of goods sold                                    |                          |   | 25,209,920       |            |                  |   | 24,545,792        |            |                   |   | 76,139,529  |            |   |   | 74,001,377  |           
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Gross profit                                          |                          |   | 17,902,240       |            |                  |   | 17,319,206        |            |                   |   | 55,230,471  |            |   |   | 52,648,062  |           
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Operating expenses:                                   |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Selling, general and administrative                   |                          |   | 18,502,839       |            |                  |   | 17,772,506        |            |                   |   | 54,426,042  |            |   |   | 52,913,203  |           
|Provision for impairment of receivable
from affiliate |                          |   | 1,941,369        |            |                  |   |                  |            |                   |   | 1,941,369   |            |   |   |            |           
|Depreciation and amortization                         |                          |   | 1,469,191        |            |                  |   | 1,683,910         |            |                   |   | 4,416,271   |            |   |   | 5,177,948   |           
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Total operating expenses |   |                  | 21,913,399 |                  |   |                   | 19,456,416 |                   |   |             | 60,783,682 |   |   |             | 58,091,151 |  
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Loss from operations                                  |                          |   | (4,011,159       | )          |                  |   | (2,137,210        | )          |                   |   | (5,553,211  | )          |   |   | (5,443,089  | )         
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Interest expense, net                                 |                          |   | (423,517         | )          |                  |   | (807,912          | )          |                   |   | (1,507,719  | )          |   |   | (2,619,769  | )         
|Realized loss on investments                          |                          |   | (709,662         | )          |                  |   |                  |            |                   |   | (709,662    | )          |   |   |            |           
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Loss before income taxes |   |                  | (5,144,338 | )                |   |                   | (2,945,122 | )                 |   |             | (7,770,592 | ) |   |             | (8,062,858 | )
|Benefit for income taxes                              |                          |   | 184,833          |            |                  |   |                  |            |                   |   | 184,833     |            |   |   |            |           
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Net loss                 |   | $                | (4,959,505 | )                |   | $                 | (2,945,122 | )                 |   | $           | (7,585,759 | ) |   | $           | (8,062,858 | )
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Net loss per common share:                            |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Basic                    |   | $                | (1.92      | )                |   | $                 | (1.24      | )                 |   | $           | (3.04      | ) |   | $           | (3.29      | )
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Diluted                  |   | $                | (1.92      | )                |   | $                 | (1.24      | )                 |   | $           | (3.04      | ) |   | $           | (3.29      | )
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|Weighted average number of common
shares outstanding: |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Basic                    |   |                  | 2,583,331  |                  |   |                   | 2,382,032  |                   |   |             | 2,495,840  |   |   |             | 2,450,390  |  
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           
|                                                      | Diluted                  |   |                  | 2,583,331  |                  |   |                   | 2,382,032  |                   |   |             | 2,495,840  |   |   |             | 2,450,390  |  
|                                                      |                          |   |                  |            |                  |   |                   |            |                   |   |             |            |   |   |             |           

See accompanying notes to consolidated condensed financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES




CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


|                                                                                |                                                      |   |                         |             |                         |   |            |            |  
|------------------------------------------------------------------------------- | ---------------------------------------------------- | - | ----------------------- | ----------- | ----------------------- | - | ---------- | ---------- | -
|                                                                                |                                                      |   | Thirty-Nine Weeks Ended |             | Thirty-Nine Weeks Ended
|                                                                                |                                                      |   | November 2, 2002        |             | November 3, 2001       
|                                                                                |                                                      |   |                         |             |                        
|Cash flows from operating activities:                                           |                                                      |   |                         |             |                         |   |            |           
|Net loss                                                                        |                                                      | $ | (7,585,759              | )           |                         | $ | (8,062,858 | )         
|Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                      |   |                         |             |                         |   |            |           
|Provision for doubtful accounts                                                 |                                                      |   |                        |             |                         |   | 45,000     |           
|Provision for impairment of receivable from affiliate                           |                                                      |   | 1,941,369               |             |                         |   |           |           
|Provision for impairment of assets and store closing                            |                                                      |   | 440,470                 |             |                         |   | 590,501    |           
|Realized loss on investment                                                     |                                                      |   | 709,662                 |             |                         |   |           |           
|Depreciation and amortization                                                   |                                                      |   | 4,416,271               |             |                         |   | 5,177,948  |           
|Change in operating assets and liabilities:                                     |                                                      |   |                         |             |                         |   |            |           
|                                                                                | Trade receivables                                    |   |                         | (149,424    | )                       |   |            | 652,412    |  
|                                                                                | Advances to suppliers                                |   |                         | (2,279,184  | )                       |   |            | (417,017   | )
|                                                                                | Inventories                                          |   |                         | (12,548,633 | )                       |   |            | (5,684,642 | )
|                                                                                | Prepaid expenses and other current assets            |   |                         | 136,149     |                         |   |            | 1,083,227  |  
|                                                                                | Due from affiliate                                   |   |                         | (1,130,200  | )                       |   |            |           |  
|                                                                                | Other assets                                         |   |                         | 154,314     |                         |   |            | 158,762    |  
|                                                                                | Accounts payable                                     |   |                         | 17,128,058  |                         |   |            | 12,390,626 |  
|                                                                                | Accrued expenses and other liabilities               |   |                         | (696,650    | )                       |   |            | (733,137   | )
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|Net cash provided by operating activities                                       |                                                      |   | 536,443                 |             |                         |   | 5,200,822  |           
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|Cash flows from investing activities:                                           |                                                      |   |                         |             |                         |   |            |           
|Additions to property and equipment                                             |                                                      |   | (1,132,706              | )           |                         |   | (1,224,702 | )         
|Proceeds from sale of investments                                               |                                                      |   | 11,733                  |             |                         |   |           |           
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|Net cash used in investing activities                                           |                                                      |   | (1,120,973              | )           |                         |   | (1,224,702 | )         
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|Cash flows from financing activities:                                           |                                                      |   |                         |             |                         |   |            |           
|Net borrowings and (repayments) under bank line of credit                       |                                                      |   | 5,998,280               |             |                         |   | (57,296    | )         
|Repayment of notes payable                                                      |                                                      |   | (343,377                | )           |                         |   |           |           
|Repayment of subordinated notes                                                 |                                                      |   | (150,000                | )           |                         |   |           |           
|Principal payments under capital lease obligations                              |                                                      |   | (1,289,934              | )           |                         |   | (1,056,348 | )         
|Net (advances) repayments to shareholders and officers                          |                                                      |   | (431,081                | )           |                         |   | 205,816    |           
|Repayment of convertible notes payable                                          |                                                      |   | (2,758,157              | )           |                         |   | (2,600,000 | )         
|Exercise of stock options                                                       |                                                      |   | 3,132                   |             |                         |   | 9,500      |           
|Purchases of treasury stock                                                     |                                                      |   | (47,302                 | )           |                         |   | (813,117   | )         
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|                                                                                | Net cash provided by (used in ) financing activities |   |                         | 981,561     |                         |   |            | (4,311,445 | )
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|Increase (decrease) in cash and cash equivalents                                |                                                      |   | 397,031                 |             |                         |   | (335,325   | )         
|Cash and cash equivalents at beginning of period                                |                                                      |   | 1,600,787               |             |                         |   | 2,219,768  |           
|                                                                                |                                                      |   |                         |             |                         |   |            |           
|Cash and cash equivalents at end of period                                      |                                                      | $ | 1,997,818               |             |                         | $ | 1,884,443  |           
|                                                                                |                                                      |   |                         |             |                         |   |            |           

See accompanying notes to consolidated condensed financial statements.

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E COM VENTURES, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)


NOTE 1 OPERATIONS AND BASIS OF PRESENTATION

E Com Ventures, Inc., a Florida Corporation (the Company or ECOMV), is
a holding company that owns and operates Perfumania Inc. (Perfumania), a
Florida corporation which is a specialty retailer and wholesaler of fragrances
and related products, and perfumania.com, inc., an Internet retailer of
fragrance and other specialty items. It also has an investment in Nimbus
Group, Inc., (Nimbus), a company listed on the American Stock Exchange
(Symbol NMC).

Perfumanias retail stores are located in regional malls, manufacturers
outlet malls, airports and on a stand-alone basis in suburban strip shopping
centers. The number of retail stores in operation as of November 2, 2002 and
November 3, 2001, were 242 and 248, respectively.

The consolidated condensed financial statements include the accounts of
ECOMV and its subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.

The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission (the SEC). Certain information and note
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted as permitted by those rules and
regulations. The Company believes that the disclosures made are adequate to
make the information presented not misleading. The financial information
presented herein, which is not necessarily indicative of results to be expected
for the current fiscal year, reflect all adjustments which, in the opinion of
management, are necessary for a fair presentation of the interim unaudited
consolidated condensed financial statements. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in our Annual Report on
Form 10-K for the fiscal year ended February 2, 2002 filed with the SEC on May
3, 2002. As the wholesale operations represent less than 10% of sales, net
income and assets for all of the periods ended November 2, 2002 and November 3,
2001, the Company has ceased reporting such information for retail and
wholesale operations.

RECLASSIFICATION

Certain fiscal 2001 amounts have been reclassified to conform with the
fiscal 2002 presentation.

NOTE 2 GOODWILL AND OTHER INTANGIBLE ASSETS

On February 3, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142 (SFAS No. 142), Goodwill and Other Intangible Assets,
which eliminated the amortization of goodwill and other intangible assets with
indefinite useful lives. During the second quarter of fiscal year 2002, the
Company completed its testing for impairment of goodwill and other intangible
assets which did not result in any impairment. Goodwill and intangible assets
will be tested for impairment at least annually and more frequently if an event
occurs which indicates the goodwill or intangible assets may be impaired.

|                        |  |                        |           |                        |  |        |           |              |  |   |           |  |  |   |           | 
|----------------------- |  | ---------------------- | --------- | ---------------------- |  | ------ | --------- | ------------ |  | - | --------- |  |  | - | --------- | 
|                        |  | As of November 2, 2002 |           | As of February 2, 2002
|                        |  |                        |           |                       
|                        |  | Gross                  |           | Accumulated            |  | Gross  |           | Accumulated 
|                        |  | Amount                 |           | Amortization           |  | Amount |           | Amortization
|                        |  |                        |           |                        |  |        |           |             
|Goodwill                |  | $                      | 2,913,735 |                        |  | $      | 1,009,284 |              |  | $ | 2,913,735 |  |  | $ | 1,009,284 | 
|Other intangible assets |  |                        | 1,163,430 |                        |  |        | 501,221   |              |  |   | 1,163,430 |  |  |   | 327,566   | 
|                        |  |                        |           |                        |  |        |           |              |  |   |           |  |  |   |           | 
|                        |  | $                      | 4,077,165 |                        |  | $      | 1,510,505 |              |  | $ | 4,077,165 |  |  | $ | 1,336,850 | 
|                        |  |                        |           |                        |  |        |           |              |  |   |           |  |  |   |           | 

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Amortization of intangible assets totaled approximately $0.2 million for
the first thirty-nine weeks of fiscal year 2002, and amortization of goodwill
and intangible assets totaled approximately $0.6 million for the first
thirty-nine weeks of fiscal year 2001. Without goodwill amortization, pro
forma net loss would have decreased approximately $0.4 million for the first
thirty-nine weeks of fiscal year 2001. Reported loss per share would have
decreased by $0.16. It is anticipated that amortization of other intangible
assets will continue at approximately $0.2 million per year for each of the
next three years.

NOTE 3  BANK LINE OF CREDIT

Perfumanias three year senior secured credit facility with GMAC
Commercial Finance LLC provides for borrowings of up to $40 million, of which
approximately $2.3 million was available at November 2, 2002, and supports
normal working capital requirements and other general corporate purposes.
Advances under the line of credit are based on a formula of eligible
inventories and bears interest at a floating rate ranging from (a) prime less
0.75% to prime plus 1% or (b) LIBOR plus 1.75% to 3.50% depending on a
financial ratio test. As of November 2, 2002, the credit facility bore
interest at 3.8%. Borrowings are secured by a first lien on all assets of
Perfumania and the assignment of a life insurance policy on the Chairman and
Chief Executive Officer of the Company. The credit facility contains
limitations on additional borrowings, capital expenditures and other items, and
contains various covenants including maintenance of minimum net worth, and
certain key ratios, as defined by the lender. As of November 2, 2002,
Perfumania was in compliance with all financial covenants.

The Company has a working capital deficit of approximately $7.1 million and has experienced a loss
from operations and a net loss for the nine-months ended
November 2, 2002 as has been the case in prior years. Although the Company
is confident that its lender will renew the existing credit facility when it expires
in May 2003 or obtain a comparable facility with another lender, an inability to renew
or replace the facility could result in an adverse effect on the Companys financial
position and its operating results. Management believes that assuming the renewal or replacement
of the credit facility, cash flows from operations, which considers the seasonal nature of the business
and the dependence on successful operating results for the fourth quarter of the year, will be sufficient
to support its working capital needs, capital expenditures and debt service for at least the
next twelve months.

NOTE 4  BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

Basic loss per common share has been computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
Diluted loss per share includes, in periods in which they have a dilutive
effect, the impact of common shares issuable upon exercise of stock options and
other common stock equivalents. For all periods presented in the accompanying
consolidated condensed statements of operations, incremental shares attributed
to outstanding stock options and convertible notes were not included because
the results would be anti-dilutive.

NOTE 5   COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) represents all non-owner changes in
shareholders equity and consists of the following:

|                                          |                          |   |                  |            |                  |   |                   |            |                   |   |            |            |   |   |            |            |  
|----------------------------------------- | ------------------------ | - | ---------------- | ---------- | ---------------- | - | ----------------- | ---------- | ----------------- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                          |                          |   | Thirteen Weeks   |            | Thirteen Weeks   |   | Thirty-Nine Weeks |            | Thirty-Nine Weeks
|                                          |                          |   | Ended            |            | Ended            |   | Ended             |            | Ended            
|                                          |                          |   | November 2, 2002 |            | November 3, 2001 |   | November 2, 2002  |            | November 3, 2001 
|                                          |                          |   |                  |            |                  |   |                   |            |                  
|Net loss                                  |                          | $ | (4,959,505       | )          |                  | $ | (2,945,122        | )          |                   | $ | (7,585,759 | )          |   | $ | (8,062,858 | )         
|Other comprehensive (loss) income        |                          |   |                  |            |                  |   |                   |            |                   |   |            |            |   |   |            |           
|Net unrealized (loss) gain
on investments |                          |   | (830,009         | )          |                  |   | 858,293           |            |                   |   | (241,334   | )          |   |   | 467,867    |           
|                                          |                          |   |                  |            |                  |   |                   |            |                   |   |            |            |   |   |            |           
|                                          | Total comprehensive loss |   | $                | (5,789,514 | )                |   | $                 | (2,086,829 | )                 |   | $          | (7,827,093 | ) |   | $          | (7,594,991 | )
|                                          |                          |   |                  |            |                  |   |                   |            |                   |   |            |            |   |   |            |           

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NOTE 6  INVESTMENTS AVAILABLE FOR SALE

As of November 2, 2002, the Company owned approximately 1,003,000 shares
of Nimbus common stock representing approximately 13% of the total outstanding
common stock. The investment in Nimbus is shown on the Companys consolidated
condensed balance sheets as investments available for sale. Ilia Lekach, the
Companys Chairman of the Board and Chief Executive Officer, is Chairman of the
Board and Interim Chief Executive Officer of Nimbus. As of November 2, 2002,
the market price for Nimbus common stock was below the Companys current
carrying value. In consideration of accounting guidance that considers a six
to nine month decline in stock price to be other than temporary, the Company
has recorded a non-cash charge of approximately $0.7 million in realized loss
on investments on the consolidated condensed statements of operations during
the thirteen and thirty-nine weeks ended November 2, 2002. The carrying value
of this investment as of November 2, 2002 totaled approximately $0.4 million.

NOTE 7  CONVERTIBLE NOTES PAYABLE

In February 2002, the Company entered into a Convertible Note Option
Repurchase Agreement (the Agreement) with holders of the Companys
outstanding Series C and D Convertible Notes. The Agreement provides the
Company a monthly option to repurchase the currently remaining $1.8 million
outstanding Series C and D Notes over an eleven month period beginning February
2002, at a price equal to the unpaid principal balance plus a 20% premium. The
portion of the notes redeemable in each of the eleven months varies. In the
event that the Company exercises its monthly option, the note holders are
restricted from converting any part of the remaining outstanding and unpaid
principal balance of such holders notes into the Companys common stock.
During the first thirty-nine weeks of fiscal year 2002, the Company paid
approximately $2.7 million to the note holders, which represented approximately
$2.3 million of principal and approximately $0.4 million of premiums.

NOTE 8  CONTINGENCIES

The Company is involved in legal proceedings in the ordinary course of
business. Management cannot presently predict the outcome of these matters,
although management believes that the Company would have meritorious defenses
and that the ultimate resolution of these matters should not have a materially
adverse effect on the Companys financial position or result of operations.

NOTE 9  RELATED PARTY TRANSACTIONS

As November 2, 2002, the Company had a balance due of approximately $3.3
million from its Chairman and Chief Executive Officer, Ilia Lekach. This
balance is in the form of notes and are recorded as a component of
shareholders equity in the accompanying consolidated condensed balance sheets.
Approximately $3.0 million of the notes are due February 1, 2003 with the
remainder of approximately $0.3 million due in five years. The notes bear
interest at prime plus 1% per annum. Interest has been paid up to the
beginning of this fiscal year.

Purchases of products from the Companys affiliate, Parlux Fragrances,
Inc. (Parlux), whose Chairman of the Board of Directors and Chief Executive
Officer is Ilia Lekach, amounted to approximately $9,806,000 and $13,241,000
for the first thirty-nine weeks of fiscal years 2002 and 2001, respectively,
representing approximately 11.5% and 16.7% of the Companys total purchases,
respectively. The amount due to Parlux as of November 2, 2002 was
approximately $17,260,000 including a $2,950,000 subordinated note payable
bearing interest at prime plus 1% per annum and $14,310,000 of accounts
payable. Accounts payable to Parlux are non-interest bearing and are included
in accounts payable affiliates in the accompanying consolidated condensed
balance sheets.

On September 30, 2002, Perfumania signed a $3,000,000 subordinated note
agreement with Parlux. The note represents the reduction of $3,000,000 in
trade payables due to Parlux. The note is due on March 31, 2003 with monthly
principal and interest payments beginning October 31, 2002, and is subordinate
to all bank related indebtedness. The outstanding amount of the indebtedness
as of November 2, 2002 is reflected in the accompanying consolidated condensed
balance sheet as subordinated note payable, affiliate.

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During the first thirty-nine weeks of fiscal year 2002, the Company
purchased approximately $8,491,000 of merchandise from a company owned by
Zalman Lekach, a former director of the Company, who is a brother of Ilia
Lekach and approximately $4,721,000 from a company owned by another brother of
Ilia and Zalman Lekach. The amounts due to these companies as of November 2,
2002 were approximately $2,951,000 and $1,961,000, respectively, and are
included in accounts payable affiliates in the accompanying consolidated
condensed balance sheets. These purchases did not include products
manufactured or distributed by Parlux.

In September 2001, the Company entered into a licensing agreement with
Take To Auction.com, Inc. (TTA), a wholly owned subsidiary of Nimbus, to
license the Companys retail fragrance Internet Web site. Under the terms of
the agreement, TTA pays the Company a royalty of 5% of defined product sales
for sales up to $8 million per annum, decreasing to 3% on sales exceeding $11
million per annum. For the first thirty-nine weeks of fiscal year 2002, sales
of merchandise from the Company to TTA approximated $1,997,000, royalties
approximated $149,000 and the Company was paid approximately $499,000. Nimbus
has disclosed in its public filings that it is negotiating the sale of TTA, its
main subsidiary. Since the proposed transaction has been in progress for
several months without closure, management has recorded a provision for
impairment of the total receivable from affiliate of $1,941,000 in the
accompanying consolidated statement of operations. If this transaction closes
and proceeds are received from Nimbus, the Company will record a recovery for
impairment of receivable from affiliate for the amount received.

NOTE 10  NON-CASH TRANSACTIONS

Supplemental disclosures of non-cash investing and financing activities
are as follows:

|                                                                                      |              |   |                                 |           |                  |   |           |           | 
|------------------------------------------------------------------------------------- | ------------ | - | ------------------------------- | --------- | ---------------- | - | --------- | --------- | 
|                                                                                      |              |   | For the Thirty-Nine Weeks Ended
|                                                                                      |              |   |                                
|                                                                                      |              |   | November 2, 2002                |           | November 3, 2001
|                                                                                      |              |   |                                 |           |                 
|Equipment under capital leases                                                        |              | $ | 429,993                         |           |                  | $ |          |          
|Conversion of notes payable and accrued interest
payable in exchange for common stock |              | $ | 517,367                         |           |                  | $ | 115,459   |          
|Decrease in accounts payable in exchange for
subordinated notes payable  affiliate   |              | $ | 3,000,000                       |           |                  | $ | 3,000,000 |          
|Net unrealized (loss) gain on marketable securities                                   |              | $ | (241,334                        | )         |                  | $ | 467,867   |          
|Cash paid during the period for:                                                      |              |   |                                 |           |                  |   |           |          
|                                                                                      | Interest     |   | $                               | 1,714,823 |                  |   | $         | 2,988,034 | 
|                                                                                      | Income taxes |   | $                               |          |                  |   | $         | 150,000   | 

NOTE 11  REVERSE STOCK SPLIT

The Companys Board of Directors authorized a one-for-four reverse stock
split of the Companys outstanding shares of common stock for shareholders of
record as of March 20, 2002. Accordingly, all data shown in the accompanying
consolidated condensed financial statements and notes has been retroactively
adjusted to reflect this change.

NOTE 12  RECENT ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and
Other Intangible Assets. This Statement affected the Companys treatment of
goodwill and other intangible assets at the start of fiscal year 2002. The
Statement requires that goodwill existing at the date of adoption be reviewed
for possible impairment and that impairment tests be periodically repeated,
with impaired assets written down to fair value. Additionally, existing
goodwill and intangible assets must be assessed and classified consistent with
the Statements criteria. Amortization of goodwill

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and other intangible assets with indefinite useful lives will cease.
Intangible assets with estimated useful lives will continue to be amortized
over those periods. Goodwill amortization will no longer be recorded. The
Company adopted SFAS 142 for the fiscal year beginning February 3, 2002, and
completed its testing of impairment of goodwill and intangible assets during
the second quarter of fiscal year 2002. Based on this testing, the Company
concluded that goodwill and intangible assets was not impaired.

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 (SFAS 143), Accounting For Asset Retirement Obligations. This
Statement requires capitalizing any retirement costs as part of the total cost
of the related long-lived asset and subsequently allocating the total expense
to future periods using a systematic and rational method. Adoption of this
Statement is required for fiscal years beginning after June 15, 2002. The
Company does not expect a significant impact on its financial position and
results of operations from the adoption of this Statement.

In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 (SFAS 144), Accounting For The Impairment Or Disposal Of
Long-Lived Assets. This Statement supersedes Statement No. 121 but retains
many of its fundamental provisions. Additionally, this Statement expands the
scope of discontinued operations to include more disposal transactions. The
Company adopted SFAS 144 for the fiscal year beginning February 3, 2002. The
adoption of SFAS 144 did not have a significant impact on the financial
statements.

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145 (SFAS 145), Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Correction. This Statement
eliminates extraordinary accounting treatment for reporting gain or loss on
debt extinguishment, and amends other existing authoritative pronouncements to
make various technical corrections, clarifies meanings, or describes their
applicability under changed conditions. The provisions of this Statement are
effective for the Company with the beginning of fiscal year 2003; however,
early application of the Statement is encouraged. Debt extinguishments
reported as extraordinary items prior to scheduled or early adoption of this
Statement would be reclassified in most cases following adoption. The Company
does not anticipate a significant impact on its financial position and results
of operations from adopting this Statement.

In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal
Activities. This Statement requires recording costs associated with exit or
disposal activities at their fair values when a liability has been incurred.
Under previous guidance, certain exit costs were accrued upon managements
commitment to an exit plan. Adoption of this Statement is required with the
beginning of fiscal year 2003. The Company does not anticipate a significant
impact on its financial position and results of operations from adopting this
Statement.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

Some of the statements in this quarterly report, including those that
contain the words anticipate, believe, plan, estimate, expect,
should, intend and other similar expressions, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or its industry to be materially different from
any future results, performance or achievements expressed or implied by those
forward-looking statements.

We may have problems raising money needed in the future

Our growth strategy includes increasing Perfumanias number of stores and
the average retail sales per store. We may need to obtain funding to achieve
our growth strategy. Additional financing may not be available on acceptable
terms, if at all. In order to obtain additional financing, we may be required
to issue securities with greater rights than those currently possessed by
holders of our common stock. We may also be required to take other actions
which may lessen the value of our common stock, including borrowing money on
terms that are not favorable to us.

Perfumanias business is subject to seasonal fluctuations, which could lead to
fluctuations in our stock price

Perfumania has historically experienced and expects to continue
experiencing higher sales in the third and fourth fiscal quarters than in the
first and second fiscal quarters. Purchases of fragrances as gift items
increase during the Christmas holiday season which results in significantly
higher fourth fiscal quarter retail sales. If our quarterly operating results
are below expectations, our stock price would likely decline. Our quarterly
results may also vary as a result of the timing of new store openings and store
closings, net sales contributed by new stores and fluctuations in comparable
sales of existing stores. Sales levels of new and existing stores are affected
by a variety of factors, including the retail sales environment, the level of
competition, the effect of marketing and promotional programs, acceptance of
new product introductions, adverse weather conditions and general economic
conditions.

Perfumania may experience shortages of the merchandise it needs because it does
not have long-term agreements with suppliers

Perfumanias success depends to a large degree on our ability to provide
an extensive assortment of brand name and designer fragrances. Perfumania has
no long-term purchase contracts or other contractual assurance of continued
supply, pricing or access to new products. While we believe that Perfumania has
good relationships with its suppliers, if Perfumania is unable to obtain
merchandise from one or more key suppliers on a timely basis, or if there is a
material change in Perfumanias ability to obtain necessary merchandise, our
results of operations could be seriously harmed.

Perfumania needs to successfully manage its growth

Even though Perfumania has grown significantly in the past several years,
it may not be able to sustain the growth in revenues that it has achieved
historically. Perfumanias growth is somewhat dependent upon opening and
operating new retail stores on a profitable basis, which in turn is subject to,
among other things, securing suitable store sites on satisfactory terms,
hiring, training and retaining qualified management and other personnel, having
adequate capital resources and successfully integrating new stores into
existing operations. It is possible that Perfumanias new stores might not
achieve expected sales and profitability, and it is possible that the opening
of new locations might adversely effect sales at existing locations.

Perfumania could be subject to litigation because of the merchandising aspect
of its business

Some of the merchandise Perfumania purchases from suppliers might be
manufactured by entities who are not the owners of the trademarks or copyrights
for the merchandise. This practice is common in the fragrance and cosmetics
business. The owner of a particular trademark or copyright may challenge
Perfumania to demonstrate that the specific merchandise was produced and sold
with the proper authority and if Perfumania is unable to
11Table of Contents

demonstrate this, it could, among other things, be restricted from
reselling the particular merchandise. This type of restriction could seriously
harm Perfumanias business and results of operations.

Future growth may place strains on our managerial, operational and financial
resources

If we grow as expected, a significant strain on our managerial,
operational and financial resources may occur. Further, as the number of our
users, advertisers and other business partners grow, we will be required to
manage multiple relationships with various customers, strategic partners and
other third parties. Future growth or increase in the number of our strategic
relationships could strain our managerial, operational and financial resources,
inhibiting our ability to achieve the rapid execution necessary to successfully
implement our business plan. In addition, our future success will also depend
on our ability to expand our sales and marketing organization and our support
organization commensurate with the growth of our business and the Internet.

We are subject to intense competition

Some of Perfumanias competitors sell fragrances at discount prices, and
some are part of large national or regional chains that have substantially
greater resources and name recognition than Perfumania. Perfumanias stores
compete on the basis of selling price, customer service, merchandise variety,
store location and ambiance. Many of our current and potential competitors
have greater financial, technical, operational, and marketing resources. We
may not be able to compete successfully against these competitors in developing
our products or services.

Expanding our business through acquisitions and investments in other businesses
and technologies presents special risks

We may expand through the acquisition of and investment in other
businesses. Acquisitions involve a number of special problems, including:



| |  |  | difficulty integrating acquired technologies, operations, and
personnel with our existing business;                 
| | - |  | --------------------------------------------------------------------------------------------------------------------
|
| |  |  | diversion of managements attention in connection with both
negotiating the acquisitions and integrating the assets;
|
| |  |  | the need for additional funding;                                                                                    
|
| |  |  | strain on managerial and operational resources as management
tries to oversee larger operations; and                
|
| |  |  | exposure to unforeseen liabilities of acquired companies.                                                           

We may not be able to successfully address these problems. Moreover, our
future operating results will depend to a significant degree on our ability to
successfully manage growth and integrate acquisitions. In addition, many of
our investments may be in early-stage companies with limited operating
histories and limited or no revenues. We may not be able to successfully
develop these early-stage companies.

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RESULTS OF OPERATIONS

COMPARISON OF THE THIRTEEN-WEEKS ENDED NOVEMBER 2, 2002 WITH THE THIRTEEN-WEEKS ENDED NOVEMBER 3, 2001.

Net sales increased 3.0% from $41.9 million in the thirteen-weeks ended
November 3, 2001 to $43.1 million in the thirteen-weeks ended November 2, 2002.
The increase in sales was principally due to a 7.4% increase in comparable
store sales. The average number of stores operated during the thirteen-weeks
ended November 2, 2002 decreased to 241 from 248 in the thirteen-weeks ended
November 3, 2001.

The increase in sales were realized although there were no significant
wholesale sales in the thirteen weeks ended November 2, 2002 versus
approximately $1.0 million in the comparable period of the prior year. The
decrease in wholesale sales was due to managements decision to concentrate on
the more profitable retail sales.

Gross profit increased 3.4% from $17.3 million in the thirteen-weeks ended
November 3, 2001 (41.4% of net sales) to $17.9 million in the thirteen-weeks
ended November 2, 2002 (41.5% of net sales).

Selling, general and administrative expenses increased 4.1% from $17.8
million in the thirteen-weeks ended November 3, 2001 to $18.5 million in the
thirteen-weeks ended November 2, 2002. The increase is attributable primarily
to higher employee compensation costs, including increased incentive
compensation paid to store personnel due to higher retail sales.

Provision for impairment of receivable from affiliate was $1.9 million
during the thirteen-weeks ended November 2, 2002, and represents a provision
for a receivable which management has deemed may not be collectible. See
further discussion at Note 9 of the notes to consolidated condensed financial
statements.

Depreciation and amortization expense was $1.7 million in the
thirteen-week period ended November 3, 2001 compared to $1.5 million in the
thirteen-week period ended November 2, 2002.

EBITDA, defined as loss from operations less depreciation and amortization
was ($0.5) million in the thirteen-weeks ended November 3, 2001 compared with
($2.5) million in the thirteen-weeks ended November 2, 2002, due primarily to a
provision for impairment of receivable from affiliate and higher selling,
general and administrative expenses offset by higher gross profit as described
above.

Interest expense, net decreased by 47.6% from $0.8 million for the
thirteen-weeks ended November 3, 2001 to $0.4 million for the thirteen-weeks
ended November 2, 2002. The decrease results from lower interest rates and a
reduction in the outstanding balance of convertible notes payable in the
thirteen-weeks ended November 2, 2002 compared to the thirteen-weeks ended
November 3, 2001.

Realized loss on investments of $0.7 million during the thirteen-weeks
ended November 2, 2002 is due to a decline in the market price on securities
available for sale resulting in the Company recording a non-cash charge. See
further discussion at Note 6 of the notes to consolidated condensed financial
statements.

Benefit for income taxes of $0.2 million during the thirteen-weeks ended
November 2, 2002 is due to prior years alternative minimum tax refund due the
Company.

As a result of the foregoing, we incurred a net loss of $5.0 million, or
($1.92) per diluted share, in the thirteen-weeks ended November 2, 2002
compared to a net loss of $2.9 million, or $(1.24) per diluted share in the
thirteen-weeks ended November 3, 2001.

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COMPARISON OF THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 2002 WITH THE THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2001.

Net sales increased 3.7% from $126.6 million in the thirty-nine weeks
ended November 3, 2001 to $131.4 million in the thirty-nine weeks ended
November 2, 2002. The increase in sales was principally attributed to an
increase in comparable store sales. Comparable store sales increased 11.7%
when compared to last year.

The increase in sales were realized although there were $2.1 million in
wholesale sales in the thirty-nine weeks ended November 2, 2002 versus
approximately $8.5 million in the comparable period of the prior year. The
decrease in wholesale sales was due to managements decision to concentrate on
the more profitable retail sales.

Gross profit increased 4.9% from $52.6 million in the thirty-nine weeks
ended November 3, 2001 (41.6% of net sales) to $55.2 million in the thirty-nine
weeks ended November 2, 2002 (42.0% of net sales) due to
increases in sales.

Selling, general and administrative expenses increased 2.9% from $52.9
million in the thirty-nine weeks ended November 3, 2001 to $54.4 million in the
thirty-nine weeks ended November 2, 2002. The increase is attributable
primarily to higher employee compensation costs, including increased incentive
compensation paid to store personnel due to higher retail sales. The
average number of stores operated during the thirty-nine weeks ended November
2, 2002 compared to the thirty-nine weeks ended November 3, 2001 decreased from
251 to 242.

Provision for impairment of receivable from affiliate was $1.9 million
during the thirty-nine weeks ended November 2, 2002, and represents a provision
for a receivable which management has deemed may not be collectible. See
further discussion at Note 9 of the notes to consolidated condensed financial
statements.

Depreciation and amortization expense decreased 14.7% from $5.2 million in
the thirty-nine weeks ended November 3, 2001 to $4.4 million in the thirty-nine
weeks ended November 2, 2002. The decrease represents the adoption of SFAS 142
on February 3, 2002 which eliminated the amortization of goodwill and other
intangible assets with indefinite useful lives.

EBITDA, defined as earnings (loss) from operations less depreciation and
amortization, improved by $0.8 million from ($0.3) million in the first
thirty-nine weeks of 2001 to ($1.1) million in the first thirty-nine weeks of
2002, due to a provision for impairment of receivable from affiliate and higher
selling, general and administrative expenses offset by increased gross profit
as described above.

Interest expense, net decreased by 42.4% from $2.6 million for the
thirty-nine weeks ended November 3, 2001 to $1.5 million for the thirty-nine
weeks ended November 2, 2002. The decrease was principally due to lower
interest rates and a reduction in the outstanding balance of convertible notes
payable in the thirty-nine weeks ended November 2, 2002 compared to the
thirty-nine weeks ended November 3, 2001.

Realized loss on investments of $0.7 million during the thirty-nine weeks
ended November 2, 2002 is due to a decline in the market price on securities
available for sale resulting in the Company recording a non-cash charge. See
further discussion at Note 6 of the notes to consolidated condensed financial
statements.

Benefit for income taxes of $0.2 million during the thirty-nine weeks
ended November 2, 2002 is due to prior years alternative minimum tax refund due
the Company.

During the thirty-nine weeks ended November 2, 2002 the Company had a net
loss of $7.6 million or ($3.04) per diluted share, compared to a net loss of
$8.1 million or ($3.29) per diluted share during the thirty-nine weeks ended
November 3, 2001.

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LIQUIDITY AND CAPITAL RESOURCES

Our principal capital requirements are to fund Perfumanias inventory
purchases, renovate existing stores, and selectively open new stores. For the
first thirty-nine weeks of fiscal 2002, these capital requirements generally
were satisfied through borrowings under our credit facility and cash flows from
operations.

At November 2, 2002, we had negative working capital of approximately
($7.1) million compared to working capital of approximately $2.8 million at
February 2, 2002. The decrease was primarily due to a decline in investments
available for sale, reclassification of the convertible note payables which
mature in March 2003 and losses for the thirty-nine weeks of fiscal 2002.

Net cash provided by operating activities during the current period was
approximately $0.5 million compared with approximately $5.2 million for the
same period in the prior year. Net cash provided by operating activities
compared to the comparative period of the prior year was negatively affected by
increased advances to suppliers and higher inventories, partially offset by
increased accounts payable. The increase in inventories was the result of
managements decision to provide a greater amount of merchandise in the stores
in anticipation of holiday sales. It is expected that these inventories will be
reduced by fiscal year-end.

Net cash used in investing activities was approximately $1.1 million,
compared with approximately $1.2 million for the same period in the prior year.
Investing activities represent purchases of fixtures and equipment for store
openings and the renovation of existing stores and information system
improvements.

Net cash provided by financing activities during the current period was
approximately $1.0 million compared with net cash used of approximately $4.3
million for the same time period in the prior year. The change was due
primarily to increased borrowings on our bank line of credit offset by
repayments of convertible notes payables of approximately $2.8 million and
advances to shareholders and officers of approximately $0.4 million.

Perfumanias three year senior secured credit facility with GMAC
Commercial Finance LLC provides for borrowings of up to $40 million, of which
$2.3 million was available as of November 2, 2002, and supports normal working
capital requirements and other general corporate purposes. Advances under the
line of credit are based on a formula of eligible inventories and bears
interest at a floating rate ranging from (a) prime less 0.75% to prime plus 1%
or (b) LIBOR plus 1.75% to 3.50% depending on a financial ratio test. As of
November 2, 2002, the credit facility bore interest at 3.8%. Borrowings are
secured by a first lien on all assets of Perfumania and the assignment of a
life insurance policy on the Chairman and Chief Executive Officer of the
Company. The credit facility contains limitations on additional borrowings,
capital expenditures and other items, and contains various covenants including
maintenance of minimum net worth, and certain key ratios, as defined by the
lender. As of November 2, 2002, Perfumania was in compliance with all
financial covenants of the line.

Although the Company
is confident that its lender will renew the existing credit facility when it expires
in May 2003 or obtain a comparable facility with another lender, an inability to renew
or replace the facility could result in an adverse effect on the Companys financial
position and its operating results. Management believes that assuming the renewal or replacement
of the credit facility, cash flows from operations, which considers the seasonal nature of the business
and the dependence on successful operating results for the fourth quarter of the year, will be sufficient
to support its working capital needs, capital expenditures and debt service for at least the
next twelve months.

During the thirty-nine weeks ended November 2, 2002, Perfumania closed 7
stores. As of November 2, 2002, Perfumania operated 242 stores. Management
intends to focus on improving the profitability of its existing stores and
expects to open 2 new stores during the fourth quarter of fiscal 2002.

RECENT ACCOUNTING STANDARDS

In July 2001, the FASB issued SFAS 142, Goodwill and Other Intangible
Assets. This Statement affected the Companys treatment of goodwill and other
intangible assets at the start of fiscal year 2002. The Statement requires
that goodwill existing at the date of adoption be reviewed for possible
impairment and that impairment tests be periodically repeated, with impaired
assets written down to fair value. Additionally, existing goodwill and
intangible assets must be assessed and classified consistent with the
Statements criteria. Amortization of goodwill and other intangible assets
with indefinite useful lives will cease. Intangible assets with estimated
useful lives will continue to be amortized over those periods. Goodwill
amortization will no longer be recorded. The Company adopted SFAS 142 for the
fiscal year beginning February 3, 2002, and completed its testing of impairment
of

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goodwill and intangible assets during the second quarter of fiscal year
2002. Based on this testing, the Company concluded that goodwill and
intangible assets was not impaired.

In July 2001, the FASB issued SFAS 143, Accounting For Asset Retirement
Obligations. This Statement requires capitalizing any retirement costs as part
of the total cost of the related long-lived asset and subsequently allocating
the total expense to future periods using a systematic and rational method.
Adoption of this Statement is required for fiscal years beginning after June
15, 2002. The Company does not expect a significant impact on its financial
position and results of operations from the adoption of this Statement.

In October 2001, the FASB issued SFAS 144, Accounting For The Impairment
Or Disposal Of Long-Lived Assets. This Statement supersedes Statement No. 121
but retains many of its fundamental provisions. Additionally, this Statement
expands the scope of discontinued operations to include more disposal
transactions. The Company adopted SFAS 144 for the fiscal year beginning
February 3, 2002. The adoption of SFAS 144 did not have a significant impact
on the financial statements.

In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction.
This Statement eliminates extraordinary accounting treatment for reporting gain
or loss on debt extinguishment, and amends other existing authoritative
pronouncements to make various technical corrections, clarifies meanings, or
describes their applicability under changed conditions. The provisions of this
Statement are effective for the Company with the beginning of fiscal year 2003;
however, early application of the Statement is encouraged. Debt
extinguishments reported as extraordinary items prior to scheduled or early
adoption of this Statement would be reclassified in most cases following
adoption. The Company does not anticipate a significant impact on its
financial position and results of operations from adopting this Statement.

In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon managements commitment to an exit plan. Adoption of this
Statement is required with the beginning of fiscal year 2003. The Company does
not anticipate a significant impact on its financial position and results of
operations from adopting this Statement.

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America. As such, some accounting policies have a significant impact on
amounts reported in these financial statements. A summary of those significant
accounting policies can be found in our 2001 Annual Report on Form 10-K, filed
on May 3, 2002 in the notes to the Consolidated Financial Statements, Note 1.
These policies have been consistently applied in all material respects and
address such matters as principles of consolidation, allowance for doubtful
accounts, investments, impairment of long-lived assets, accrued self-insurance,
revenue recognition and stock based compensation. While the estimates and
judgments associated with the application of these policies may be affected by
different assumptions or conditions, we believe the estimates and judgments
associated with the reported amounts are appropriate in the circumstances.

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##### Table of Contents






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

During the quarter ended November 2, 2002, there have been no material
changes in the information about our market risks as of February 2, 2002 as set
forth in Item 7A of the 2001 Form 10-K.




ITEM 4. CONTROLS AND PROCEDURE

Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation within 90 days of the filing date of this report,
that our disclosure controls and procedures are effective for gathering,
analyzing and disclosing the information we are required to disclose in our
reports filed under the Securities Exchange Act of 1934. There have been no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the previously
mentioned evaluation.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Not applicable.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.




ITEM 5. OTHER INFORMATION

Not applicable.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits



| |                  
| | -----------------
| | Index to Exhibits

|            |  |                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                              
|            |  |                                                                                                                                                     
|99.1        |  | Certification by Chief Executive
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes  Oxley Act of
2002.
|           
|99.2        |  | Certification by Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes  Oxley Act of
2002.

(b)  Reports on Form 8-K.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | On
September 27, 2002 and October 17, 2002, the Company filed 8-Ks announcing changes in its Board of Directors.

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##### Table of Contents



E COM VENTURES, INC.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                        |  |                                                                                            
|----------------------- |  | -------------------------------------------------------------------------------------------
|                        |  | E COM VENTURES, INC.                                                                       
|                        |  |                                                                                            
|                        |  | (Registrant)                                                                               
|                       
|                       
|                       
|                       
|Date: December 16, 2002 |  | By: /s/ ILIA LEKACH                                                                        
|                        |  |                                                                                            
|                        |  | Ilia Lekach
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
|                       
|                       
|                        |  | By: /s/ A. MARK YOUNG                                                                      
|                        |  |                                                                                            
|                        |  | A. Mark Young
Chief Financial Officer
(Principal Financial and Accounting
Officer)         

18



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##### Table of Contents



CERTIFICATIONS

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ilia Lekach, certify that:

(1)  I have reviewed this quarterly report on Form 10-Q of E Com Ventures,
Inc.;

(2)  Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and

(3)  Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.

(4)  The registrants other certifying officer and I (herein the Certifying
Officers) are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such internal controls to ensure that material information
relating to the registrant, including its consolidated subsidiaries
(collectively the Company) is made known to the Certifying Officers
by others within the Company, particularly during the period in which
this quarterly report is being prepared;



| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) evaluated the effectiveness of the registrants internal controls
as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and



| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) presented in this quarterly report the conclusions of the
Certifying Officers about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;

(5)  The registrants Certifying Officers have disclosed, based on our most
recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors:



| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies (if any) in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and

(6)  The registrants Certifying Officers have indicated in this quarterly
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

|                                                         |  | 
|-------------------------------------------------------- |  | 
|Date: December 16, 2002                                  |  | 
|                                                        
|                                                        
|                                                        
|By: /s/ ILIA LEKACH

Ilia Lekach
Chief Executive Officer |  | 

19



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##### Table of Contents



CERTIFICATIONS

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, A. Mark Young, certify that:

(1)  I have reviewed this quarterly report on Form 10-Q of E Com Ventures,
Inc.;

(2)  Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and

(3)  Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.

(4)  The registrants other certifying officer and I (herein the Certifying
Officers) are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such internal controls to ensure that material information
relating to the registrant, including its consolidated subsidiaries
(collectively the Company) is made known to the Certifying Officers
by others within the Company, particularly during the period in which
this quarterly report is being prepared;



| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) evaluated the effectiveness of the registrants internal controls
as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and



| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) presented in this quarterly report the conclusions of the
Certifying Officers about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;

(5)  The registrants Certifying Officers have disclosed, based on our most
recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors:



| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies (if any) in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and

(6)  The registrants Certifying Officers have indicated in this quarterly
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

|                                                             |  | 
|------------------------------------------------------------ |  | 
|Date: December 16, 2002                                      |  | 
|                                                            
|                                                            
|                                                            
|By: /s/ A. MARK YOUNG

A. Mark Young
Chief Financial Officer |  | 

20